Author: Matthew G. Saroff

Best Prediction for 2010

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Bruce Krasting, retired finance guy, makes his predictions, and while most are pretty safe, thinks like ‘Phants pick up seats, but Dems retain majorities, and Boeing delivers a pitifully small number of Dreamliners, one is completely off the wall, and I mean that in a good way:

  • Tim Geithner will resign as Treasury Secretary. Sheila Bair will replace him.

My inclination on reading this was to go all Poppy Bush, and say, “Not gonna happen,” but based on recent events, I need to add a qualifier, and say, “Not gonna happen before November 2,” the day of the general election.

I think that Barack Obama really believes that Geithner and Summers are the best people for the job, and he believes that the American people believe this too, and it’s going to take a big clue stick, something like House Speaker David Boehner, to convince him otherwise.

I tend to agree that a change in party control is unlikely, but I think that there will be significant losses by the Dems, on the order of 30-35 seats, which will put the House in the 1981-83 dynamic, where the Democrats nominally controlled the house, but the Republicans could always peel away enough Dems to get their way.

Saab Looks to Go Feet Wet on Indian Gripen Proposal

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Credit: SAAB CONCEPT

In an effort to improve its chances to sell its Gripen to India for the MMRCA competition Saab has once mooted the possibility of an aircraft carrier capable Gripen:

Saab believes modifying the Gripen NG to meet an Indian requirement for a carrier-borne fighter would add only 400 kg. (880 lb.), giving the aircraft—dubbed Sea Gripen—an empty weight of 7,500-8,000 kg.

…………

The Sea Gripen would require a new main undercarriage and nose gear, airframe strengthening in specific areas and a redesigned arrestor hook. Given the comparatively small size of the Gripen, this obviates the need for folding wings. The company is proposing Sea Gripen as a “partner program,” with the first target country being India.

Even for an aircraft as light as the Gripen, having a delta of only 400 kg (880 lb) is pretty impressive, so I’m wondering if they are trying the same thing that was proposed for the Eurofighter Typhoon, when it was proposed to create an auto-land system that allowed for a flare before landing to the need to reinforce the landing gear and structure.

[on edit]

There is also the possibility that Swedish operational requirements, which include the ability to operate from austere fields, such as roadways, may have already resulted in a landing gear that is rather more robust than those found on the normal western jet fighter.

Why Yes, It Appears that Barack Obama Has Sold Us Out Again…………

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Silly peasant, it’s only the bankers, insurance companies, and other big players who get their promises kept. If it’s a promise to the little people, it doesn’t count.

This time, it’s net neutrality:

The Obama administration and its allies at the Federal Communications Commission are retreating from a militant version of Net neutrality regulations first outlined by FCC Chairman Julius Genachowski in September.

That’s my reading of a number of recent developments, underscored by comments made by government speakers on a panel on the first day of a Tech Policy Summit at CES in Las Vegas.

…………

Signs of more modest Net neutrality regulations include resignation in late October of Susan Crawford, who took part in Thursday’s panel discussion and who was previously a key adviser to the president on technology and communications. According to the conservative-leaning American Spectator, [according to the paid to lie by Richard Mellon Scaife American Spectator] Crawford’s version of Net neutrality was too radical for White House economic adviser Lawrence Summers, contributing to her early departure.

…………

Part of the reason is some unexpected political pressure, including a letter signed by 72 congressional Democrats opposing the FCC’s proposed rules soon after they were announced.

But the bigger explanation is the growing priority within the administration for nationwide, affordable broadband service. In the course of preparing the national broadband plan, mandated by the 2009 stimulus bill, universal high-speed access has taken on increased significance in the government’s hopes for a rapid economic recovery. Beyond the current financial woes, Congress, the FCC and the White House all recognize the importance of improving the communications infrastructure to maintain U.S. competitiveness in technology innovation.

You see, the Telcos won’t build out high speed fiber/cable unless we allow them to bend us over the table and do us without any lube at all.

This is why the US has the highest costs and the slowest speeds for internet access in the developed world (here, here, and here), because allowing the Baby Bells and the Cable companies to squash competition and extort money.

F-35 News, 1 Good, 2 Bad

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Click for full size

Finally!

On the good side, the F-35B, specifically air frame BF-01, has finally engaged the lift fan in flight, and everything was, as the flight test people say, “Nominal”:

The Lockheed Martin F-35B Lightning II stealth fighter engages its short takeoff/vertical landing propulsion system in flight for the first time, near Naval Air Station Patuxent River, Md., on Jan. 7. F-35 Lead STOVL Pilot Graham Tomlinson said afterward that the aircraft flew smoothly with the STOVL system engaged and was very easy to control.”

This is a good thing, though it is somewhat behind schedule, and Lockheed-Martin is thinks that it is necessary to add planes to the test program, so as to reduce the test schedule slippage from 2 years (!) to 6 months:

Lockheed Martin Corp. may add an aircraft-carrier model to a group of F-35 test planes as the company works to limit delays on the fighter jets to six months or less instead of the two-plus years expected by the Pentagon.

I’m not sure that this would help though, as Secretary of Defense Robert Gates has just ordered a delay in deliveries of the aircraft:

Defense Secretary Robert Gates has ordered a delay in the Lockheed Martin Corp. F-35 program, cutting the Pentagon’s planned purchases by 10 aircraft in fiscal 2011 and a total of 122 through 2015, according to a budget document.

More than $2.8 billion that was budgeted earlier to buy the military’s next-generation fighter would instead be used to continue its development.

The delay is a setback for both Gates and Lockheed.

Setback is one way to put it.

So is clusterf%$#, death-spiral, shambles, snafu, and many other words I’m not in the mood to look up right now.

This Explains a Lot About the Washington Post

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This story is old, I saved it when I was visiting my Mother-in-Law’s, but my sense of this remains the same.

There was a snowball fight in Washington, DC, and some people threw snowballs at a Hummer driven by a Washington, DC police officer, who then drew his gun and threatened the participants.

If it hadn’t been caught on video, and posted to Youtube (included), and the police claimed that it never happened, until, of course the video, and the photographs showed up all over the web.

This is actually pretty standard: Until you have outrageous law enforcement misconduct on tape, the police deny that it ever happened, and so I have very little to say about this.

That being said, I do have something to say about the Washington Post‘s coverage of the incident.

You see, they took the original police story, “Nothing to see here, move along,” at face value, and they did so despite the fact that a Washington Post editorial staffer was at the event and reported what happened:

Washington Post editorial aide Stephen Lowman was at 14th and U on Saturday when the controversial snowball-fight-cum-police-indiscretion went down. He wasn’t there on assignment–he was just taking it all in.

And take it all in he did. He eye-witnessed the snowball fest and the cop waving around a gun, not to mention all the hubbub that ensued.

So Lowman got on the phone to the Post, to give the newsroom a heads-up. He says he was placed in contact with staff writer Matt Zapotosky. Lowman told Zapotosky about the confrontation and the gun. It was just after 3 pm.

………………

Two hours later, at 5:40 pm, the inexplicable takes place: The Washington Post files a post by Zapotosky and Martin Weilrefuting the photographic evidence already on the Web and taking the official position of the D.C. Police Department. Here are some key excerpts:

Assistant Chief Pete Newsham, who leads the department’s investigative services bureau, said it appears the patrol officer acted appropriately, and the worst the detective might have done is use inappropriate language in dealing with the snowball fighters.

So, what we have by the time that the Post covers the story is:

  • A staffer who says that a cop pulled a gun at a snowball fight.
  • Pictures and videos all over the internet showing that the cop pulled his gun and brandished it, which is technically assault with a deadly weapon.

Now the folks at DC’s alternative paper, the Washington City Paper, whose link I am citing in the story, broke this. They had the pictures, they linked to the Youtube, etc., and they, or at least their reporter Erik Wemple, think that this is all about the WaPo not wanting to link to them, because they are a bunch of DFH’s* from the alternative weekly.

I think that they are wrong. I think that what is going on is far more malevolent.

I think that this has nothing to do with the Post dissing an alternative weekly competitor, and it has everything to do with being an upper middle class, and overwhelmingly white institution in a city that is majority black.

Simply put, they went with the police story, because the unspoken bias of the Washington Post editors is that they need to keep the N***ers down. They go with a blatantly false police account of the events for the same reason that they so so aggressively repeat and amply blatantly false Republican spin: They believe that the police and the Republicans are the best way to keep N***ers in their place in the District.

Then again, maybe I am just reading way to much into this, and it’s just a crappy and lazy reporter.

*Dirty F%$#ing Hippies.

You Have to Love the Internet

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Because, you can find a monkey chimp getting to 2nd base with Bo Derek in her 1981 celluloid horror, Tarzan, the Ape Man, and see an animated gif of the scene:

I’m no prude, and even though I’ll probably never do it again, I understand that boobs are fun to suck on. That’s great. Everybody suck more boobs! I just cannot believe that the frigid MPAA was down with this (and still is since the movie is in print and everything!), and that Bo Derek, the sole producer of Tarzan, the Ape Man, was like, “Yes. That time that the monkey rounded second on me is sooooo going in the movie!” This has to be the most line-crossing thing I’ve ever seen in a film OK’ed by the MPAA. A cursory Google search came up with zero mentions of this, which means I’m either the first person to point out the fucked-upedness of this, or I’m just easily excited. Kind of like that monkey.

Anyway, here’s a still. I’m tempted to transcribe this scene and read it for Porn for the Blind or perhaps recreate it with Winston and some peanut butter on my nipple, but I doubt even that would make it more real. My mind is blown forever.

Completely NSFW, though the good folks at the MPAA gave the film an “R” rating.

Really, NSFW, though Bo Derek is very buff, and it reminds us all why she was a sex symbol in the early 1980s.

Adventures in American MBA Wankertude

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Steve Blank relates a story, one which is all to frequently repeated in American Boardrooms, where the new CFO comes into a startup company that is finally making a profit, and decides to end the provision of free soda to employees, which saves $10,000 a month, but chases away the experienced staff:

Sometimes financial decisions that are seemingly rational on their face can precipitate mass exodus of your best engineers.

……………

I had lived through this same conversation four times in my career, and each time it ended as an example of unintended consequences. No one on the board or the executive staff was trying to be stupid. But to save $10,000 or so, they unintentionally launched an exodus of their best engineers.

This company had grown from the founders, who hired an early team of superstars, many now managing their own teams. All these engineers were still heads-down, working their tails off, just as they had been doing since the first few months of the company. Too busy working, most were oblivious to the changes that success and growth had brought to the company.

The Elves Leave Middle Earth – Sodas Are No Longer Free
One day the engineering team was clustered in the snack room looking at the soda machine. The sign said, “Soda now 50 cents.” The uproar began. Engineers started complaining about the price of the soda. Someone noticed that instead of the informal reimbursement system for dinners when they were working late, there was now a formal expense report system. Some had already been irritated when “professional” managers had been hired over their teams with reportedly more stock than the early engineers had. Lots of email was exchanged about “how things were changing for the worse.” A few engineers went to the see the CEO.

But the damage had been done. The most talented and senior engineers looked up from their desks and noticed the company was no longer the one they loved. It had changed. And not in a way they were happy with.

The best engineers quietly put the word out that they were available, and in less than month the best and the brightest began to drift away.

Truth be told, I’ve never worked a company that gave out free sodas in the break room in the first place, and if I were to start a company, I would not choose this as a benefit for the employees, but it is American management that would create that would chase away its most valuable employees by counting pennies this way.

To the degree that the United States has achieved economic success since the end of the 2nd World War, it has been in spite of management, not because of it.

Capitalism at Its Finest: Debit Card Edition

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Andrew Martin exposes how Visa and the banks have colluded to increase the interchange fees charged merchants for debit cards.

Basically, because Visa can use its market share to force merchants to accept its products, and because it splits the interchange fees with the banks, it creates a situation where fees in the US are the highest in the world, and every merchant, and by extension every buyer, pays to shovel money to Visa and its client banks.

The reason for this is because Visa and MasterCard do not compete for end user consumers, they compete to get banks to offer their cards to end-user consumers, and they compete by raising prices, which they split with the banks:

As debit cards became the preferred plastic in American wallets, Visa has turned its attention to PIN debit too and increased its market share even more. And it has succeeded — not by lowering the fees that merchants pay, but often by pushing them up, making its bank customers happier.

In an effort to catch up, MasterCard and other rivals eventually raised fees on debit cards too, sometimes higher than Visa, to try to woo bank customers back.

“What we witnessed was truly a perverse form of competition,” said Ronald Congemi, the former chief executive of Star Systems, one of the regional PIN-based networks that has struggled to compete with Visa. “They competed on the basis of raising prices. What other industry do you know that gets away with that?”

This is only possible because Visa has a near monopoly, and even after it settled an anti-trust lawsuit, and agreed not to tie its expensive debit cards to all Visa products, merchants still cannot afford to diss the product, because the market share is too high.

This is, of course, what the Chicago School’s “perfect markets” create: Monopolies and near markets that create market “stickiness” that ill serve anyone but the monopolist.

It’s a capitalist’s dream, but a consumer’s nightmare, to the tune of about $427 per household per year.

Shoot Me, I Agree With David Frum

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Who is a Canadian turned right wing former George W. Bush speech writer.

Frum takes Commentary magazine,* and staff writer Jennifer Rubin, over her article “Why Jews Hate Palin”, in which she suggests that Jews, or at least Jewish liberals, hate rural people, hunters, people who work with their hands (note here, Palin never really worked with her hands except for summer jobs when she was in school), people who have large families, the military and military families, and people who denigrate education.

Also she thinks that Jews find her too pretty, and hate her for that.

You know, her article could come from the mouth of Patrick Buchanan, it’s so full of stereotypes, and Frum is remarkably kind to her in his response, but he nails her to the last wall.

The last paragraph says it all”

But even this is not the worst of it. Just guessing, but I think the real and most fundamental problem Jews have with Palin is not her gleeful ignorance, but her willful divisiveness. More than any politician in memory, Palin seems to divide her fellow-Americans into first class and second class citizens, real Americans and not-so-real Americans. To do her justice, she has never said anything to suggest that Jews as Jews fall into the second, less-real, class. But Jews do tend to have an intuition that when this sort of line-drawing is done, we are likely to find ourselves on the wrong side.

Also, add the fact that she literally shared a stage with a professional witch hunter, one who had driven “witches” out of his community, at her church, and the juxtaposition of Christian witch-hunters and the Jewish community is………How to put this?………Most unfortunate.

That being said, Frum does miss a point: that Jews don’t view her more negatively than the general population:

The entirety of the Commentary article rests on the notion that Jews actually disproportionately dislike Palin. As her one piece of evidence, Rubin cites a 9/08 poll showing that only 37 percent of Jews approve of Palin. Is this really disproportionately low?

………………

So going by their partisan voting patterns alone, we would expect 36.5 percent of Jews to approve of Palin — almost exactly what that poll found.

Though to be fair to Mr. Frum, I found that blog post in his tweets, and the negative tags for this post apply to Ms. Rubin, and not him.

*No links to the magazine, ever. It got hijacked by the John Podhoretz Neocon insanity in the late 1960s, and no more link to them than I would link to Michelle Malkin.

Paul Krugman Destroys the Fannie/Freddie CRA Myth

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Paul Krugman looks at both home and commercial real estate, and notices that they had a virtually identical trajectory.

So the bubble in commercial real estate, where Fannie and Freddie do not lend, and where the Commercial Reinvestment Act held no sway, had just the same sort of bubble.

From my perspective, the CRE bubble is highly significant; it gives the lie both to those who blame Fannie/Freddie/Community Reinvestment for the housing bubble, and those who blame predatory lending. This was a broad-based bubble.

While I agree that the graph shows that government involvement in the US residential real estate market did not produce the crisis, I do think that the bubble was an artifact of excessively lax lending standards and excessively low interest rates, and these were an artifact of government policy, at least if you consider the actions of then Federal Reserve Board, and its Chairman Alan “Bubbles” Greenspan to be government acts.

Economics Update

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Click for full size

Deleveraging: The recession continues until it’s done
h/t Calculated Risk


H/t Calculated Risk

Well, the NFP came out, and the non-farm payroll fell by 85,000, and unemployment (U3) remained at 10%, which kind of gives the lie to all those forecasts that predicted an increase.

On bright spot, however, was that “November payrolls were revised to show the economy actually added 4,000 jobs rather than losing 11,000,” so the 22 month losing streak is broken….Kind of. (BLS link)

Consumer spending is not bouncing back either, as US consumer credit fell by $17.5 billion, a new record, indicating that consumers are continuing to deleverage and pay down their debts, taking us yet further into the paradox of thrift.

The fact that US office vacancies hit 17 pct, a 15-year high, reinforces the idea that things are still not turning around, though a surprise increase in wholesale inventories weighs in on the other side of the ledger.

Treasuries rose. and the dollar fell on the jobs report, as investors fled the dollar, and ran to treasuries, because of concerns about the strength of the recovery.

Of more concern is the fact that oil still rose after the abysmal NFP report, which implies that the new stable level for oil prices is above $80/bbl, which would have the effect of further crippling any recovery.

Cracks in the Republican Façade

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Dick Lugar just called out Dick Cheney on his statements about terrorism:

Richard Lugar, the top Republican on the Senate Foreign Relations Committee, defended President Barack Obama’s handling of recent terrorism threats, taking issue with former Vice President Dick Cheney’s criticism.

“It’s unfair,” Lugar said in an interview for Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “I think the president is focused.”

It’s either a sign of the apocalypse, or Senator Lugar is thinking about switching parties.

Little Timothy Geithner has Been a Bad, Bad, Boy

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Bloomberg is reporting that the New York Bank of the Federal Reserve instructed AIG not to make disclosures that SEC regulators were demanding regarding their payouts on swap contracts (The New York Times has more, including copies of the emails in questions, which I’ve posted below.):

The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

Now, I take anything from Darrell Issa with a grain of salt, he’s a liar, and one of the rather more corrupt Republican members of Congress, but seeing as how House Banking Committee Chairman Barney Frank is saying that this is “Troubling,” and he wants hearings, and both Edolphus Towns, Chairman, and Elijah Cummings, member, of the House Oversight and Government Reform Committee, have been screaming about getting a hearing about this, it seems that Frank may get his wish.

The big deal here is that the NY Fed took over negotiations, and paid off AIG’s swaps at 100¢ on the dollar, which is pretty much unheard of, and at the time that this information was being suppressed, Geithner was already the nominee to be Secretary of the Treasury:

This episode suggests that the NY Fed – and Geithner, then a nominee for Secretary of the Treasury – were worried about any political fallout from the swap payments. When the details were released months later (and after Geithner was confirmed as Treasury Secretary), critics alleged that Geithner had failed to negotiate a better deal for the swap payments with the Wall Street firms.

They perpetuated a fraud upon the American public and on Congress, because little Timmy wanted to be SecTreas.

The New York Fed is now saying that Geithner was uninvolved in the decision to suppress this information, but it’s a no-win situation.

Geithner was front and center in making sure that the swaps were paid off at face value, so the attempt to suppress the date was either because he was covering his own ass., or because he was incompetent and uninvolved, and the Fed bureaucracy bailed him out because they saw him as being the Fed’s Bitch*.

FWIW, I think that this was all part of the campaign by the bureaucracy of the Fed to make Geithner Secretary of the Treasury, though Felix Salmon has a point when he says that the completely over the top culture of secrecy at the central bank was has always been a flaw in the culture of the institution: Independence does not equal secrecy, though the Fed always has seen it that way.

David Dayen at FDL makes the cogent point that even if the payouts were legal, it appears that the cover-up was not legal.

The real problem, as Barry Ritholtz so ably notes, is as follows:

Between Summers and Geithner, it appears that President Obama has made the exact same mistake that one George W. Bush did: Instead of filling his administration’s most important posts with his own people, he reached back to prior admins (Cheney, Rumsfeld, etc) and loaded up on incompetent retreads.

(emphasis mine)

One thing is certain though, that the case for auditing the Federal Reserve has been made much stronger by the most recent scandal.

*A good bet, since the history shows that Timothy Geithner has been the bitch of anything remotely close to a bank or a brokerage his entire career.

Emails reproduced after break:

E-mails from N.Y. Fed to A.I.G. to Not Disclose Counterparty Payments

I Have Mixed Feelings about the French Burqa Ban

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The leader of the French Parliament, Jean-François Copé, has restated his intention to ban the Burqa (see pic) in France.

He plans to put forward a law to impose fines of up to €750 ($1050) for anyone who appears in public with their faces covered, and there would, “Stiffer punishments would be laid down for men who ‘forced’ their wives or daughters to wear full-body veils.”

There would be exceptions for the wearing of masks on “festive occasions,” which means, I guess that Halloween has become an institution in France too.

Interestingly enough, Nicolas “President Bling Bling” Sarkosy is trying to slow this down, though one wonders, considering his statements about having a “debate on national identity” got the ball rolling, how sincere he is.

It’s clear that the politics play into some very base feelings, but there is a legitimate question about what is, or should be appropriate public behavior in any society, even a modern Western society.

While societies should be accommodating, there does have to be a line drawn.

I believe that a head scarf (Hijab) should be allowed both in public and the workplace, I do think that the Burqa, and it’s slightly less extreme cousins the Niqab and Chador are over when used outside of a religious observance.

The politics here get really weird though:

Yesterday the veteran far-right leader, Jean-Marie Le Pen, also rejected the need for new legislation against the burka, perhaps surprisingly. He said that the existing French legal code already banned masks in public places. “All they need to do is apply the law,” he said.

Le Pen opposes the Burqa ban? Le Pen?!!?!? I do not understand French politics.

I would also note that the number of people who wear the extreme coverings in France is well small, perhaps 2,000 out of a female Muslim population of 1½ million, so either it’s a problem that does not need to be addressed, or it’s one that can be nipped in the bud, depending on where you feelings lie in this matter.

As I said at the beginning, I am conflicted: I think that the Burqa is a very bad thing, but I’m still not sure if it rises to the level of a problem that requires a formal prohibition under law.